D To demography (Economics)

D

A security of questionable value according to the rating agency Standard & Poor.

daisy-chain scheme

A commercial scheme for passing a commodity through a chain of company subsidiaries to avoid taxation.

Dalton improving tax reform

An income transfer from a household of high social rank to a lower ranking household that does not change the ranking of households. This marginal tax change yields a marginal improvement in social welfare.

data

Measured observations obtained from officially or privately collected statistics: the raw material of empirical economics.

data-mining

persistent and repeated attempts to find significant relationships between variables. However, the excessive zeal of the researcher may produce a false relationship. This misuse of econometrics gives undue prominence to insignificant economic relationships.

David Hume Institute

An economic research institute founded in 1985 and now based in Edinburgh, Scotland, with Sir Alan Peacock as its first executive director. It has examined the economics of regulation, broadcasting, small firms and banking.

Davignon Plan

The plan of the European Coal and Steel Community in 1980 to restructure the European steel industry; named after the european community’s Industry Commissioner, Viscount Etienne Davignon. State aid was offered (mainly for environmental improvements or research and development) provided that there was a cut in steel-making capacity. Minimum prices were set together with production quotas to cover 85 per cent of the European Community’s output. The plan succeeded in scrapping production quotas by the end of 1987 and using market forces to complete the adjustment process.


Davos man

A businessman, banker, official or intellectual who is a literate and numerate graduate with a belief in individualism, market economics and democracy. These men, from any culture, control governments and their economic capabilities. The World Economic Forum is held annually in Davos, Switzerland.

dawn raid

A method of acquiring the shares of a company popular in London in the early 1980s. A company was taken over by rapid purchase of shares at the beginning of the working day. Since shares were acquired at different prices, the International Stock Exchange Council has now regulated this technique.

days of grace

The extra days after a debt, e.g. an insurance premium, is due in which the debtor is allowed to pay.

day trade

The purchase and sale of a stock market security in a margin account within the same day. Also known as daylight trade.

DDD

Standard & Poor’s credit rating of a security which reflects that servicing of it is in default or in arrears.

dead cat bounce

A short lived rise in the price of a stock that had dropped considerably.

deadweight loss

A loss of consumer’s surplus by buyers not matched by a corresponding producer’s surplus. This concept is crucial to much of welfare economics, e.g. the analysis of the effects of a monopoly, of taxes and of tariffs. The size of the deadweight loss depends on the elasticity of demand or supply.

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Deane, Phyllis Mary, 1918

Educated at Glasgow University. Research officer at the National institute for Economic and social Research from 1941 to 1945, at the Colonial Office from 1946 to 1949 and at the Department of Applied Economics, Cambridge University, from 1950 to 1951. Fellow of Newnham College, cambridge, from 1961 to 1983 and professor of economic history from 1981 to 1982. she has produced several works on colonial national income accounting and the celebrated The First Industry Revolution (Cambridge University Press, 1965) and The Evolution of Economic Ideas (Cambridge University Press, 1978), one of the finest introductions to the history of economic thought.

debasing a currency

An action taken by a monetary authority to reduce the value of the money it issues, e.g. by diminishing the intrinsic value of the currency or by over-issuing banknotes. This is mainly done to finance government expenditure and to extract a high level of SEIGNORAGE.

debenture

A company or corporation security, usually taking the form of a fixed interest loan, secured on the assets of a company.

debit card

A card which makes possible the immediate debiting of a bank account at the time of purchasing goods or services; an ‘electronic cheque book’. In the late 1980s major UK clearing banks, for example, made arrangements with retailers to introduce this system which makes possible transactions without the use of cash, cheques or credit cards. Credit is only given to debit cardholders with permission to overdraw.

Debreu, Gerard, 1921

A French emigre to the USA in 1948, educated in mathematics in Paris and subsequently professor at Chicago, Yale and Berkeley (since 1960) Universities. With Arrow in 1954, he used topological methods to prove the existence of general equilibrium. His Theory of Value: an Axiomatic Analysis (1959, 1971) produced a more sophisticated exposition of competitive price theory, using set theory and topology. In 1983 he was awarded the nobel prize for economics. His work is theoretical rather than empirical in nature.

debt

The liabilities of a firm, a government or a household. A company’s debt often takes the form of fixed interest debentures, cumulative non-voting preference shares and short-term bank loans. A government has bills as short-term debt and long-term debt issued as bonds. A household’s debts include bank loans and liabilities incurred to purchase property and consumer durables.

debt contract

An agreement to lend money.

debt-equity swap

The exchange of a fixed interest debt for an equity shareholding. Countries with large debts to Western banks have been offered this solution to their indebtedness. Previously, swaps took the form of banks giving loans to companies wanting to make an investment in a debtor country. Fixed interest debt has also grown in Third World countries because of their lack of developed stock markets.

debt finance

Short- or long-term fixed interest finance that does not involve the transfer of ownership but usually requires collateral.

Whatever the financial success or failure of an enterprise the commitment to servicing the debt remains. It is contrasted with equity finance.

debt illusion

Voters’ lack of awareness of the cost of public sector expenditure being financed by borrowing rather than taxation. They cannot perceive correctly the present value of future benefits in the public sector because of imperfect information, with the consequence that a larger amount of public expenditure is approved.

debt-led growth

Economic development financed by borrowing, usually from foreign countries. This turned out to be a disastrous policy in the 1970s leading to the third world DEBT PROBLEM.

debt neutrality

Non-responsiveness of a portfolio of investments to changes in the mixture of taxes and borrowing used by a government to finance the public sector’s real spending programme on goods and services.

debt policy

The course of action taken to manage a country’s nationaldebt. The official approach often adopted is to maintain market conditions so as to maximize the present and future demand for government debt, but such a policy stance may be in conflict with credit/interest rate policy.

debt restructuring

Changing the maturities of the debts of a government or a firm so that it is easier to service them. Restructuring often takes the form of lengthening the maturity of debt. it is allowed by creditors who would otherwise have little prospect of receiving interest and repayment of the principal.

debt security

A loan made by an investor to an issuer who agrees to repay the debt at a specified date and to pay interest. These securities are issued by both governments and corporations and can be linked to an equity issued by a financial intermediary.

debt service indicator

A measure of the ability of a borrower to meet capital and interest payments on a debt. Indicators used include the debt service ratio (interest and capital repayments due divided by export earnings), the cash flow ratio (current account surplus minus interest payments divided by export earnings), and the solvency ratio (the percentage of a country’s export earnings which it would have to devote to debt servicing to keep its total debt-export ratio on a declining trend).

debt sustainability

The calculation of the projected earnings from exports relative to the cost of servicing the external debt of a country.

debt trap

The consequence for a government, or an individual, of borrowing at a rate of interest greater than the rate of growth of its income causing its current expenditure on items other than debt servicing to be increasingly reduced.

decelerator

A fiscal change, e.g. a cut in public expenditure or an increase in taxation, which counteracts the expansionary effects of the investment accelerator.

decentralized market economy

An economy in which economic agents below the level of central government take major investment, production and pricing decisions. Allocation is according to market conditions rather than planning targets.

decile

The value obtained from a set of data arranged in order of magnitude by dividing it into ten equal parts. The first, or lowest, decile is sometimes used as a benchmark for calculating low pay.

decimalization

A change in the currency of a country so that the basic unit is divisible into ten parts. The French franc and US dollar have been divided into a hundred cents since the eighteenth century and the Australian dollar since 1966. In the UK in 1971 the pound, previously divisible into twenty shillings or 240 pence, was made equivalent to 100 new pence. It is feared that this type of currency change leads to consumers losing their price perception and unwittingly accepting price increases. However, the quotation of prices in old and new forms reduces this disguised inflation.

decision cycle

The recurrent round of economic decisions made by national governments and other economic agents. Exchange rate decisions have to be made several times a day; many commodity prices and interest rates are changed weekly; tax changes, wages and product prices mainly annually. Major investment decisions are made infrequently.

deconcentration

1 Dispersal of an industry over a wider area.

2 The break-up of an industry dominated by a few firms. This has occurred under antitrust legislation.

dedicated budget

A budget which permits the use of funds for specified types of public expenditure only because of strict legislation. Much US federal budgeting has this inflexibility so further Congressional approval is needed to make some public spending changes.

deemed tax

US corporate tax concession equal to the amount of total income already paid to a foreign government. If a US corporation has paid $10 million tax abroad on a pretax income of $20 million when it remits $5 million in dividends to the USA its deemed tax will be $10 million x 0.5.

deep discount bond

A bond paying little or no interest which is sold below its redemption value. Investors make a capital gain by holding it to the date of redemption and, in many cases, reduce their total tax burden as income taxation is often more punitive than capital gains taxation.

deep integration

An association of national economies going beyond free trade to a harmonizing of national economic regulations. Increasingly the european union has pursued this course to realize its original objectives.

de facto population

A population count based on where people were on census night. This is a popular form of census, especially in developing countries.

deficiency payment

A form of governmental subsidy to farmers equal to the difference between the market price of an agricultural commodity and the price set under an agricultural policy. The purpose of the payment is to achieve a desired level of farmers’ incomes.

deficit financing

1 Government spending not fully financed by government revenue usually undertaken to reduce unemployment and to stimulate the growth of output.

This type of financing, also known as ‘pump priming’, has often taken the form of public works. keynes recommended that the government’s current expenditure budget should be in balance but that its capital budget could go into deficit in times when aggregate demand needed to be stimulated.

2 The financing of a balance of payments deficit.

deflation

1 A reduction in aggregate demand. A deflationary policy of extra taxation and lower public expenditure is chosen by governments to correct balance of payments deficits and to lower the price level.

2 A fall in the average price level.

3 The elimination of price increases from an index of production or consumption. Economic statisticians are frequently engaged in ‘deflating’ time series to separate real from nominal changes.

deflationary gap

The excess of aggregate supply over aggregate demand of a national economy. This overall situation of an economy at less than full employment has often encouraged keynesian policies of deficit spending.

degrees of freedom

The number of observations in a sample minus the number of population parameters to be estimated by the sample.

de-industrialization

The decline of a country’s manufacturing industry absolutely or relatively. This fall in manufacturing activity is most noticeable in employment, but a slower rate of growth, or even a fall, in output and a fall in the world share of trade in manufactures also measure this change. Most OECD countries have experienced de-industrialization in the past twenty years as economic activity has switched from manufacturing to service industries. Marxist economists are especially concerned with this because of their view that what is productive is the creation of goods, not of services.

de jure population

The population permanently resident in a particular area.

delinking

The breaking off of trading and other relationships between Third World countries and Western countries. It is argued that the benefits of such a course of action include an increased freedom to shape the development of that country, as well as less chance of economic exploitation by foreign investors.

Delors Plan

The plan of the European Community Committee for the Study of Economic and Monetary Union of 1989 chaired by Jacques Delors, the President of the european community. The European Community set up the committee to propose a progression from the single european act 1986 to a single currency and a common monetary policy throughout the European Community. It was proposed that there should be three stages in the movement to the committee’s goals. The first stage would be the greater convergence of economic performance through co-ordination of budgetary and monetary policies, possibly with a European Reserve Fund with reserves drawn from each participating central bank. The second stage would provide a medium-term framework for key economic objectives so that stable economic growth could be achieved. Finally precise rules of a non-binding nature would be created for annual budgets and the finance of government activity, and a European System of Central Banks for the formulation of a common monetary policy would be set up. It was later agreed to let the euro replace national currencies in 2002.

Delphi method

A method of business forecasting used by many large US corporations consisting of panels of experts expressing their views of the future and then revising them in the light of their colleagues’ views so that bias and extreme opinions can be eliminated

delta stock

The least traded stocks and shares which are not quoted on the stock exchange AUTOMATED QUOTATION SYSTEM.

demand

1 The amount of factors of production, or of their products, desired at a particular price. This is shown graphically in a DEMAND CURVE.

2 Total expenditure on a good or service.

demandable debt instruments

Banknotes, current/checking bank accounts.

demand curve

A graph relating the quantity demanded of a good, service or factor of production to different prices of it. Although John stuart mill first had the idea of such schedules, it was cournot and the margin-alists who introduced them to economics. As the curve shows the relationship between only two variables, the ceteris paribus assumption has to be made. Much controversy has arisen about the nature of the marshallian demand curve, particularly the circumstances under which there can be a movement along the demand curve without affecting the assumption that real income is constant. The normal demand curve is assumed to be downward sloping because of the psychological belief underlying the law of diminishing marginal UTILITY.

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demand deposit

Funds held at a bank with a notice period of less than seven days. They can take many forms, including checking accounts, certified cashier’s and officer’s cheques, travellers’ cheques, letters of credit sold for cash, withheld taxes, withheld insurance and time deposits whose notice of withdrawal has expired.

demand for money

The demand for cash or a bank deposit, not for an asset such as a stock certificate or bond. keynes, by distinguishing the TRANSACTIONS, PRECAUTIONARY and SPECULATIVE demands for money revolutionized monetary theory. It is a broader theory about the motivation for holding money than the quantity theory of money that money is held solely for transactions purposes. The demand for money by a representative individual can be considered in terms of marginal utility as being the result of balancing the imputed yield from holding it (the convenience and security of a cash holding) against the cost in terms of interest income forgone. Discussions of monetarists’ views have led to many econometric studies of demand for money functions which have shown them to be less stable than originally asserted.

demand management

Discretionary changes in national monetary and fiscal policies attempting to change the level of aggregate demand. Under the influence of keynesianism such policies were very popular in the 1950s and 1960s. However, some critics of demand management have asserted that frequent changes destabilized the economy.

demand-pull inflation

inflation originating in excess demand. keynes introduced this approach to inflation in his How to Pay for the War (1940). The notion of an ‘inflationary gap’, i.e. an excess of aggregate demand over aggregate SUPPLY at FULL EMPLOYMENT, was used to explain this phenomenon instead of the view inherent in the quantity theory of money that inflation was caused by an increase in the money supply. The fullest form of demand-pull inflation is when excess demand occurs in both factor and product markets.

demand-shift inflation

Inflation brought about by a structural change in an economy which permanently raises demand. This is a consequence of increases in wages and in the prices of capital goods in expanding sectors being communicated to other sectors. It is a mixed form of inflation as changes in both demand and cost bring about the ultimate increase in product prices.

demarcation

Reserving work activities for a particular occupation. Thus, for example, in an engineering plant where there is demarcation, tasks will be assigned separately to mechanical, electrical and electronics engineers. craft unions, anxious to protect the work available for their members, have been keen to follow this practice, especially in the UK. The inflexibility in the use of labour brought about by this practice has lowered productivity and increased labour costs.

dematerialization

Paperless settlement of stock exchange transactions.

demographic accounting

The tabulation of the population according to its characteristics and its states (at birth, death and place) at various dates.

demographic transition

A model showing a society’s population changes through four stages (see the figure). stage 1 is the traditional society with little population growth, a stable population with a high birth rate counteracted by an equally high death rate. stage 2 shows rapid population growth because improved health care has pushed down the death rate but the birth rate is still high.

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Stage 3 has a population decline caused by couples desiring fewer children. Stage 4 is a mature society with a stable population brought about by higher incomes and better education, where couples have about two children each. Many Third World countries are still in the second stage; most of the OECD countries are in stage 4.

demography

The study of the size and composition of human populations, particularly their births, deaths and migration. Both historical recording and projections of future populations are calculated to provide the basis for economic and social planning.

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